The Debt Management Office (DMO) of the Federal Government of Nigeria has announced that N120 billion in bonds will be issued in November 2024.
Compared to the N180 billion raised the month before, this is a 33.3% drop.
Due to the Federal Government’s apparent slowdown in bond offers, it is also among the lowest amounts provided this year.
A change in borrowing strategy is indicated by the 33.3% decrease in November, which may be the result of better revenue inflows or decreased financial requirements.
Analysis Of The Bond Sale In November
The November bond auction includes two existing bond re-openings, each worth N60 billion: the 19.30% FGN APR 2029 (5-year Re-opening) and the 18.50% FGN FEB 2031 (7-year Re-opening).
Because of their appealing coupon rates, which reflect the present yield environment, both offers are anticipated to draw a sizable amount of investor interest.
November 18, 2024 is the date of the auction, and November 20, 2024 is the date of the settlement. Units are available in multiples of N1,000 and are priced at N1,000 each, with a minimum subscription of N50,000,000.
According to the Trustee Investment Act, the bonds are securities in which trustees may make investments. Pension funds and institutional investors find them appealing since they also benefit from tax exemptions under the Personal Income Tax Act (PITA) and the Company Income Tax Act (CITA).
In order to guarantee tradability and liquidity, the bonds are also listed on the FMDQ OTC Securities Exchange and the Nigerian Exchange Limited.
What To Note
As previously reported by THE NEWS CHRONICLES, the Federal Government raised N289.597 billion at its bond auction in October 2024.
Two reopened tranches of existing bonds were offered in this October 21 auction: the 18.50% FGN FEB 2031 (7-year bond) and the 19.30% FGN APR 2029 (5-year bond).
Strong investor interest in the auction led to a greater allotment despite the nation’s inflationary challenges.
In the October auction, the government first put up N180 billion, with N90 billion going to each bond. The N190 billion offered in September, which was split among three bonds with tenors of five, seven, and nine years, was marginally higher than this.
The October allotment jumped to N289.597 billion despite giving a smaller sum, indicating increased investor appetite for government assets.
Subscriptions for the 5-year bond (APR 2029) totalled N60.737 billion, whereas bids for the 7-year bond (FEB 2031) increased significantly to N328.584 billion.
Investor participation increased significantly, from the N293.097 billion subscription in September to N389.321 billion in October.
Investors’ ongoing desire for longer-dated assets, which provide superior returns in a time of rising interest rates, is reflected in the strong level of participation.
In light of tighter monetary policy and inflation concerns, investors’ expectations for higher yields were reflected in the October auction’s substantial increase in marginal rates.
